Skechers yesterday agreed to pay $50M to "settle false-advertising allegations" by the FTC and attorneys general of 44 states, according to Jim Puzzanghera of the L.A. TIMES. Most of the money “will be used to provide partial refunds to consumers who paid $60 to $100 a pair for shoes.” Federal and Calif. state officials said that the “rocker-bottom Shape-ups and other toning shoes made by Skechers USA Inc. don't live up to the hype from the company and its high-profile endorsers.” But Puzzanghera writes the cost of the settlements “didn't hurt Skechers as much as the market did.” Skechers was the leader in a market estimated to be $1.1B at its peak in '10 -- "before an oversupply and lawsuits over the health claims of toning shoes led to a sharp falloff in sales.” Skechers will pay “twice as much as Reebok International Ltd. to resolve similar FTC claims.” Reebok agreed in September to pay $25M to "settle allegations that it falsely claimed its toning shoes strengthened muscles.” Skechers President Michael Greenberg said that the settlements “do not prevent the company from selling toning shoes or making claims about their benefits” (L.A. TIMES, 5/17). In DC, Dina El Boghdady notes the FTC “expects the settlement, which has not been finalized, to be its largest ever in terms of the amount of money refunded to consumers” (WASHINGTON POST, 5/17). The AP’s Jennifer Kerr noted the settlement also “involves the company’s Resistance Runner, Toners, and Tone-ups shoes and claims of deceptive advertising for those shoes as well.” Consumers who bought the shoes “would be eligible for refunds, though it’s not clear how much money they’ll get.” The FTC said that the amount “will depend on how many claims are received in the eight-month filing period.” Most of the $40M federal settlement “would be returned to consumers, but a small amount of the settlement would be used to administer the payouts” (AP, 5/16). ABC News’ Linsey Davis said the settlement "isn’t likely to put Skechers out of business." She added, "They’re the leaders in a $1 billion a year industry in a country eager to look great without working out” (“World News,” ABC, 5/16).
STATE OF THE INDUSTRY: An FTC spokesperson “declined to say whether it was pursuing legal action against other makers of toning shoes, like Fila and New Balance.” In N.Y., Anahad O’Connor wrote the announcement “spells more trouble for a once-flourishing industry that is now struggling with plummeting sales.” Skechers in a statement said that it "stood by its products” (NYTIMES.com, 5/16). AD AGE’s Natalie Zmuda wrote, “More so than any other marketer, Skechers put a spotlight on the toning category, with Super Bowl spots” in ‘10 and ‘11. Ads in ’10 “featured customer testimonials and NFL Hall of Famer Joe Montana.” The ’11 ad starred Kim Kardashian. Brooke Burke “also appeared in ads” (ADAGE.com, 5/16).
